Gulf Real Estate Investors’ Turkish Delight

Wealthy investors from the Arab Gulf are buying up Turkish apartments, offices and resort properties like hotcakes these days, taking advantage of a change in laws last year that opened the door for investment by people from the region.

Turkey ended its so-called reciprocity restrictions last May. Before they were lifted, the country allowed foreign investors to buy only if Turks were allowed to buy property in their countries. That shut out most investors across the Gulf.

Now, however, as Turkey gradually liberalizes its foreign investment laws, Turkish property executives and analysts say investors from the GCC are streaming in. While precise figures are hard to come by, Tolga Han, the vice chairman of the consultancy Projebeyaz International, said investors from the region were likely to take up a large part of the up to $5 billion of expected annual foreign real estate investment in the coming years.

“Gulf investors are actively redirecting sovereign wealth funds, investment funds and private equity funds into Turkish real estate, which offers a great investment proposition and high capital growth,” he said.

Turkey, of course, is also benefiting from the instability in Egypt and Syria, which have long been prime destinations for investment from the Gulf. The promise of good returns in a market seen as more developed than other parts of the region and with better economic prospects than Europe is another big draw.

Whatever the reasons Gulf investors are turning to Turkey, there’s little doubt it is happening. Astas Holding, a developer building a resort on Turkey’s Mediterranean coast, said in June that 10% of its investors came from the United Arab Emirates alone.

Baris Emiroglu, a marketing manager at Torunlar, Turkey’s biggest domestic malls developer, said a large portion of foreign investors in the company’s Mall of Istanbul project came from the GCC. About 21% were from the broader Middle East, he said.

“I think the proximity is a big deal,” he said last week at the Cityscape Global conference in Dubai, where 36 Turkish companies were exhibiting. “People don’t want to fly for hours and hours and make connections to embrace a different lifestyle. Turkey is a Muslim country, but it has a different place among the other Muslim countries.”

Returns, he added, were excellent. Investors could expect between 35% and 50% appreciation between the time they paid for a yet-to-be-built property and its completion some two years later, he said.

The Turkish developer Ağaoğlu set up an office in Dubai this March because a large contingent of investors in its projects were from the region. Alaa Al Asali, an assistant sales manager at the company, said a Kuwaiti investor had bought 80 units in one of its projects. About 10% of investors in another project were from the Gulf.

“That’s the reason we’re offering the office here,” he said. “We started to notice it, and for them to have a representative office here it’s easier for them to guide them about the payments or update them on the project.”

For now, the future looks bright for Gulf investment in Turkey, where the International Monetary Fund expects economic growth to hover around 4% annually for the next few years – stellar rates in comparison to the large European countries. Should the region’s political dynamics change and places like Egypt once again become viable investment destinations, however, Turkey may quickly find itself in a stiffer competition for funds from the Gulf.